Vanke gains access to offshore capital with H-share listing

HK listing allows developer to cut fundraising costs as market correction erodes its margin

PUBLISHED : Tuesday, 24 June, 2014, 5:58am
UPDATED : Tuesday, 24 June, 2014, 5:58am

China Vanke's scheduled trading of H shares on Hong Kong's main board tomorrow will enable the mainland's biggest developer by sales to tap the offshore capital market and cut fundraising costs at a time when a market correction and rising operation expenses are eroding its profit margin, analysts said.

The company, founded by Wang Shi, announced yesterday that 1.31 billion H shares would be listed without raising any new capital as they would be moved from its foreign-currency-denominated B shares, which were previously listed in Shenzhen.

"Vanke's H-share listing gives investors a rare opportunity this year to invest in mainland developers, not only for valuation reasons," said Edison Bian, research head for China property at UOB Kay Hian. "Investors will also favour its quick asset turnover capability."

The B shares last traded on June 3 at HK$12.41 each. The price offered to 1.84 per cent of the B-share holders who opted to cash out was HK$12.39 apiece.

Vanke's property sales rose 16.2 per cent in the first five months to 81.5 billion yuan (HK$102.5 billion), outperforming many of its peers. The average selling price increased 8.5 per cent to 12,594 yuan per square metre from a year earlier, according to calculations based on company data.

"Vanke can now access the overseas capital market with a diversified financing channel," said David Hong, a senior analyst with property services company E-House (China).

The listing would also provide investors with a chance to gain exposure to the mainland's e-commerce-fuelled logistics market, a sub-sector that is still growing rapidly under the recent downturn, as Vanke held five million sqmetres of land bank for warehouses, he added.

When the bell rings tomorrow, it will mark a successful end to the one-year-plus journey Vanke has gone through to convert its shares. The developer last year bought a Hong Kong-listed property firm and the shell company, Vanke Property (Overseas), is being used as a platform to fund Vanke's overseas expansion, including in Hong Kong.

Vanke has issued some offshore bonds. It raised US$400 million this month through a five-year medium-term note carrying a coupon rate of 4.5 per cent, cheaper than loans granted by onshore banks.